Even if a company is profitable, it doesn’t always mean it’s a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.

Profits are valuable, but they’re not everything. At StockStory, we help you identify the companies that have real staying power. Keeping that in mind, here are three profitable companies that don’t make the cut and some better opportunities instead.

Novanta (NOVT)

Trailing 12-Month GAAP Operating Margin: 12.6%

Originally a pioneer in the laser scanning industry during the late 1960s, Novanta (NASDAQ: NOVT) offers medicine and manufacturing technology to the medical, life sciences, and manufacturing industries.

Why Does NOVT Fall Short?

1. 4% annual revenue growth over the last two years was slower than its industrials peers
2. Flat earnings per share over the last two years underperformed the sector average
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 3.7 percentage points

At $125.08 per share, Novanta trades at 31.4x forward P/E. Check out our free in-depth research report to learn more about why NOVT doesn’t pass our bar.

Belden (BDC)

Trailing 12-Month GAAP Operating Margin: 11.2%

With its enamel-coated copper wire used in WWI for the Allied forces, Belden (NYSE: BDC) designs, manufactures, and sells electronic components to various industries.

Why Are We Hesitant About BDC?

1. Sales stagnated over the last two years and signal the need for new growth strategies
2. Earnings per share lagged its peers over the last two years as they only grew by 1.8% annually
3. Eroding returns on capital suggest its historical profit centers are aging

Belden is trading at $116.58 per share, or 15.4x forward P/E. Read our free research report to see why you should think twice about including BDC in your portfolio.

Integra LifeSciences (IART)

Trailing 12-Month GAAP Operating Margin: 10.2%

Founded in 1989 as a pioneer in regenerative medicine technology, Integra LifeSciences (NASDAQ: IART) develops and manufactures medical technologies for neurosurgery, wound care, and surgical reconstruction, including regenerative tissue products and surgical instruments.

Why Should You Dump IART?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Free cash flow margin dropped by 19.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate

Integra LifeSciences’s stock price of $13.11 implies a valuation ratio of 5.3x forward P/E. Dive into our free research report to see why there are better opportunities than IART.

Stocks We Like More

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